The Partner and Localizer of BRCA2 (PALB2) tumor suppressor is a scaffold protein that links BRCA1 with BRCA2 to initiate homologous recombination (HR). PALB2 interaction with DNA strongly enhances HR efficiency. The PALB2 DNA-binding domain (PALB2-DBD) supports DNA strand exchange, a complex multistep reaction supported by only a few protein families such as RecA-like recombinases or Rad52. The mechanisms of PALB2 DNA binding and strand exchange are unknown. We performed circular dichroism, electron paramagnetic spectroscopy, and small-angle X-ray scattering analyses and determined that PALB2-DBD is intrinsically disordered, even when bound to DNA. The intrinsically disordered nature of this domain was further supported by bioinformatics analysis. Intrinsically disordered proteins (IDPs) are prevalent in the human proteome and have many important biological functions. The complexity of the strand exchange reaction significantly expands the functional repertoire of IDPs. The results of confocal single-molecule FRET indicated that PALB2-DBD binding leads to oligomerization-dependent DNA compaction. We hypothesize that PALB2-DBD uses a chaperone-like mechanism to aid formation and resolution of complex DNA and RNA multichain intermediates during DNA replication and repair. Since PALB2-DBD alone or within the full-length PALB2 is predicted to have strong liquid-liquid phase separation (LLPS) potential, protein-nucleic acids condensates are likely to play a role in complex functionality of PALB2-DBD. Similar DNA-binding intrinsically disordered regions may represent a novel class of functional domains that evolved to function in eukaryotic nucleic acid metabolism complexes.